Correlation Between Bank of America and HCM Defender
Can any of the company-specific risk be diversified away by investing in both Bank of America and HCM Defender at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank of America and HCM Defender into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and HCM Defender 500, you can compare the effects of market volatilities on Bank of America and HCM Defender and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank of America with a short position of HCM Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and HCM Defender.
Diversification Opportunities for Bank of America and HCM Defender
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and HCM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and HCM Defender 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Defender 500 and Bank of America is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank of America are associated (or correlated) with HCM Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Defender 500 has no effect on the direction of Bank of America i.e., Bank of America and HCM Defender go up and down completely randomly.
Pair Corralation between Bank of America and HCM Defender
Considering the 90-day investment horizon Bank of America is expected to generate 1.65 times more return on investment than HCM Defender. However, Bank of America is 1.65 times more volatile than HCM Defender 500. It trades about 0.27 of its potential returns per unit of risk. HCM Defender 500 is currently generating about 0.14 per unit of risk. If you would invest 4,253 in Bank of America on August 30, 2024 and sell it today you would earn a total of 524.00 from holding Bank of America or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. HCM Defender 500
Performance |
| Timeline |
| Bank of America |
| HCM Defender 500 |
Bank of America and HCM Defender Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and HCM Defender
The main advantage of trading using opposite Bank of America and HCM Defender positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, HCM Defender can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HCM Defender will offset losses from the drop in HCM Defender's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| HCM Defender vs. JPMorgan BetaBuilders International | HCM Defender vs. JPMorgan Core Plus | HCM Defender vs. JPMorgan BetaBuilders Canada | HCM Defender vs. JPMorgan Emerging Markets |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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